FOR THE YEAR ENDED 31 DECEMBER

CONSOLIDATED FINANCIAL STATEMENTS IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION AND INDEPENDENT AUDITORS REPORT FOR THE YEAR ENDED 31 DECEMBER 2017

CONSOLIDATED FINANCIAL STATEMENTS CONTENTS Page Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union Consolidated Statement of Financial Position as at 31 December 2017 2 Consolidated Statement of Profit or Loss for the year ended 31 December 2017 3 Consolidated Statement of Comprehensive Income for the year ended 31 December 2017 4 Consolidated Statement of Changes in Equity for the year ended 31 December 2017 5 Consolidated Statement of Cash-flows for the year ended 31 December 2017 6-7 Notes to the Consolidated Financial Statements 8-106

CONSOLIDATED STATEMENT OF PROFIT OR LOSS (in HUF mn) Note Interest Income: Loans 521,121 510,449 Placements with other banks 42,686 74,588 Securities available-for-sale 34,442 34,557 Securities held-to-maturity 56,343 51,427 Amounts due from banks and balances with the National Banks 1,444 9,866 Other 10,479 8,804 Total Interest Income 666,515 689,691 Interest Expense: Amounts due to banks, the Hungarian Government, deposits from the National Banks and other banks (46,475) (75,925) Deposits from customers (50,995) (72,554) Liabilities from issued securities (5,727) (4,726) Subordinated bonds and loans (2,259) (10,239) Other (7,303) (6,518) Total Interest Expense (112,759) (169,962) NET INTEREST INCOME 553,756 519,729 Provision for impairment on loan and placement losses 5.,8.,24. (40,848) (93,473) NET INTEREST INCOME AFTER PROVISION FOR IMPAIRMENT ON LOAN AND PLACEMENT LOSSES 512,908 426,256 Income from fees and commissions 25. 315,606 272,235 Expense from fees and commissions 25. (54,413) (49,244) Net profit from fees and commissions 261,193 222,991 Foreign exchange gains, net 21,870 36,142 Gains on securities, net 7,930 20,828 Dividend income 4,152 3,054 Release of provision on securities available-for-sale and held-to-maturity 10 55 Other and held-to-maturity operating income 26. 65,469 19,628 Other operating expense 26. (51,240) (36,461) Net operating gain 48,191 43,246 Personnel expenses 26. (213,886) (191,442) Depreciation and amortization 11. (48,988) (44,427) Goodwill impairment 11. (504) - Other administrative expenses 26. (236,072) (220,229) Other administrative expenses (499,450) (456,098) PROFIT BEFORE INCOME TAX 322,842 236,395 Income tax expense 27. (41,503) (33,943) NET PROFIT FOR THE PERIOD 281,339 202,452 From this, attributable to: Non-controlling interest 197 242 Owners of the company 281,142 202,210 Consolidated earnings per share (in HUF) Basic 39. 1,074 765 Diluted 39. 1,074 765 The accompanying notes to consolidated financial statements on pages 8 to 106 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards. 3

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (in HUF mn) NET PROFIT FOR THE PERIOD 281,339 202,452 Items that may be reclassified subsequently to profit or loss: Fair value adjustment of securities available-for-sale 15,677 9,583 Effect of tax rate-modification (19% 9%) - 2,241 Net investment hedge in foreign operations 155 525 Foreign currency translation difference (20,535) 24,554 Items that will not be reclassified subsequently to profit or loss: Change of actuarial costs related to employee benefits (241) 61 Subtotal (4,944) 36,964 NET COMPREHENSIVE INCOME 276,395 239,416 From this, attributable to: Non-controlling interest 173 641 Owners of the company 276,222 238,775 The accompanying notes to consolidated financial statements on pages 8 to 106 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards. 4

Note Share capital OTP BANK PLC. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in HUF mn) Capital reserve Share-based payment reserve Retained earnings and reserves 1 Option reserve Treasury shares Noncontrolling interest Balance as at 1 January 2016 28,000 52 24,707 1,291,738 (55,468) (58,021) 2,651 1,233,659 Net profit for the period - - - 202,210 - - 242 202,452 Other Comprehensive Income - - - 36,565 - - 399 36,964 Share-based payment 30. - - 3,530 - - - - 3,530 Dividend for the year 2015 - - - (46,200) - - - (46,200) Sale of Treasury shares 22. - - - - - 9,882-9,882 Treasury shares loss on sale - - - (3,915) - - - (3,915) acquisition 22. - - - - - (11,982) - (11,982) Payments to ICES holders 21. - - - (3,741) - - - (3,741) Balance as at 31 December 2016 28,000 52 28,237 1,476,657 (55,468) (60,121) 3,292 1,420,649 Net profit for the period - - - 281,142 - - 197 281,339 Other Comprehensive Income - - - (4,920) - - (24) (4,944) Share-based payment 30. - - 3,598 - - - - 3,598 Dividend for the year 2016 - - - (53,200) - - - (53,200) Sale of Treasury shares 22. - - - - - 10,342-10,342 Treasury shares loss on sale - - - (2,839) - - - (2,839) acquisition 22. - - - - - (13,510) - (13,510) Payments to ICES holders 21. - - - (1,380) - - - (1,380) Balance as at 31 December 2017 28,000 52 31,835 1,695,460 (55,468) (63,289) 3,465 1,640,055 Total 1 See details in Note 21. The accompanying notes to consolidated financial statements on pages 8 to 106 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards. 5

CONSOLIDATED STATEMENT OF CASH-FLOWS (in HUF mn) OPERATING ACTIVITIES Note (Restated) Profit before income tax 322,842 236,395 Dividend income (4,152) (3,054) Depreciation and amortization 11. 48,988 44,427 Goodwill impairment 11. 504 - Release of provision on securities 7.,10. (10) (55) Provision for impairment on loan and placement losses 5.,8., 24. 40,848 93,473 Provision for impairment on investments 9. 184 687 (Release of provision) / Provision for impairment on investment properties 12. (71) 833 Provision for impairment on other assets 13. 8,213 2,218 Provision / (Release of provision) on off-balance sheet commitments and contingent liabilities 18. 15,957 (15,268) Share-based payment 2.,30. 3,598 3,530 Unrealized gains / (losses) on fair value change of securities held for trading 18,335 (9,969) Unrealized gains on fair value change of derivative financial instruments 11,966 14,762 Net changes in assets and liabilities in operating activities Net increase in financial assets at fair value through profit or loss (92,524) (40,988) Net increase in loans, before allowance for loan losses (415,250) (412,425) Net increase in other assets before provisions for impairment (10,737) (30,622) Net increase in deposits from customers 582,112 556,004 Net (decrease) / increase in other liabilities (118,048) 100,329 Net decrease / (increase) in compulsory reserves at the National Banks 99,391 (45,079) Income tax paid (14,797) (19,922) Net Cash Provided by Operating Activities 497,349 475,276 Interest received 695,935 702,276 Interest paid (112,718) (158,181) The accompanying notes to consolidated financial statements on pages 8 to 106 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards. 6

CONSOLIDATED STATEMENT OF CASH-FLOWS (in HUF mn) [continued] INVESTING ACTIVITIES Note (Restated) Net decrease / (increase) in placement with other banks before allowance for placements losses 147,968 (62,830) Purchase of securities available-for-sale (955,382) (814,918) Proceeds from sale of securities available-for-sale 545,180 613,661 Net increase in investments in associates (682) (304) Net decrease / (increase) in investments in other companies 8,762 (191) Dividends received 3,739 3,054 Purchase of securities held-to-maturity (1,166,466) (877,412) Redemption of securities held-to-maturity 970,365 692,831 Purchase of property, equipment and intangible assets (131,028) (71,575) Proceeds from disposals of property, equipment and intangible assets 22,383 19,537 Net decrease in investment properties before provision for impairment 5,060 40 Net decrease / (increase) in advances for investments included in other assets 8 (3) Net cash paid for acquisition 32. (128,588) - Net Cash Used in Investing Activities (678,681) (498,110) FINANCING ACTIVITIES Net (decrease) / increase in amounts due to banks, the Hungarian Government, deposits from the National Banks and other banks (167,670) 10,465 Cash received from issuance of securities 184,636 27,539 Cash used for redemption of issued securities (81,216) (120,015) Decrease in subordinated bonds and loans (1,430) (157,326) Increase in non-controlling interest 173 640 Payments to ICES holders 21. (1,380) (9,135) Purchase of Treasury shares 10,342 9,881 Sales of Treasury shares (16,349) (15,897) Dividends paid (53,191) (46,152) Net Cash Used in Financing Activities (126,085) (300,000) Net decrease in cash and cash equivalents (307,417) (322,834) Cash and cash equivalents at the beginning of the period 1,128,610 1,427,292 Foreign currency translation (20,504) 24,152 Cash and cash equivalents at the end of the period 4. 800,689 1,128,610 The accompanying notes to consolidated financial statements on pages 8 to 106 form an integral part of these Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards. 7

NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS 1.1. General information OTP Bank Plc. (the Bank or OTP ) was established on 31 December 1990, when the previously State-owned company was transformed into a public liability company. The Bank s registered office address is 16, Nador Street, Budapest 1051. In 1995, the shares of the Bank were listed on the Budapest and the Luxembourg Stock Exchanges and traded on the SEAQ board on the London Stock Exchange and on PORTAL in the USA. These Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 13 March 2018. The structure of the Share capital by shareholders (%): Domestic and foreign private and institutional investors 98% 97% Employees 1% 2% Treasury shares 1% 1% Total 100% 100% The Bank s Registered Capital consists of 280.000.010 pieces of ordinary shares with the nominal value of HUF 100 each, representing the same rights to the shareholders. The Bank and its subsidiaries ( Entities of the Group, together the Group ) provide a full range of commercial banking services through a wide network of 1,488 branches. The Group has operations in Hungary, Bulgaria, Russia, Ukraine, Croatia, Romania, Slovakia, Serbia and Montenegro. The number of employees at the Group: The number of employees at the Group 41,514 38,575 The average number of employees at the Group 41,127 37,782 1.2. Basis of Accounting The Entities of the Group maintain their accounting records and prepare their statutory accounts in accordance with the commercial, banking and fiscal regulations prevailing in Hungary and in case of foreign subsidiaries in accordance with the local commercial, banking and fiscal regulations. The Group s presentation and functional currency is the Hungarian Forint ( HUF ). Due to the fact that the Bank is listed on international and national stock exchanges, the Bank is obliged to present its financial statements in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union (the EU ). Certain adjustments have been made to the Entities statutory accounts in order to present the Consolidated Financial Statements of the Group in accordance with all standards and interpretations approved by the International Accounting Standards Board ( IASB ). The Consolidated Financial Statements have been prepared in accordance with IFRS as adopted by the EU. IFRS as adopted by the EU do not currently differ from IFRS as issued by the IASB, except for portfolio hedge accounting under IAS 39 Financial Instruments: Recognition and Measurement ( IAS 39 ) which has not been approved by the EU. As the Group does not apply portfolio hedge accounting under IAS 39, there would be no impact on these Consolidated Financial Statements, had it been approved by the EU before the preparation of these financial statement. 8

NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS [continued] 1.2. Basis of Accounting [continued] 1.2.1. The effect of adopting new and revised International Financial Reporting Standards effective from 1 January 2017 The following amendments to the existing standards and new interpretation issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the current reporting period: - Amendments to IAS 7 Statement of Cash Flows - Disclosure Initiative adopted by EU on 6 November 2017 (effective for annual periods beginning on or after 1 January 2017), - Amendments to IAS 12 Income Taxes - Recognition of Deferred Tax Assets for Unrealised Losses adopted by EU on 6 November 2017 (effective for annual periods beginning on or after 1 January 2017), - Amendments to IFRS 12 due to Improvements to IFRSs (cycle 2014-2016) resulting from the annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to removing inconsistencies and clarifying wording adopted by the EU on 7 February 2018 (amendments to IFRS 12 are to be applied for annual periods beginning on or after 1 January 2017). 1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not yet effective At the date of authorization of these financial statements the following standards, amendments to the existing standards and interpretations issued by IASB and adopted by the EU which were in issue but not yet effective. - IFRS 9 Financial Instruments adopted by the EU on 22 November 2016 (effective for annual periods beginning on or after 1 January 2018), - IFRS 15 Revenue from Contracts with Customers and amendments to IFRS 15 Effective date of IFRS 15 adopted by the EU on 22 September 2016 (effective for annual periods beginning on or after 1 January 2018), - IFRS 16 Leases adopted by the EU on 31 October 2017 (effective for annual periods beginning on or after 1 January 2019), - Amendments to IFRS 4 Insurance Contracts - Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts adopted by the EU on 3 November 2017 (effective for annual periods beginning on or after 1 January 2018 or when IFRS 9 Financial Instruments is applied first time), - Amendments to IFRS 15 Revenue from Contracts with Customers - Clarifications to IFRS 15 Revenue from Contracts with Customers adopted by the EU on 31 October 2017 (effective for annual periods beginning on or after 1 January 2018), - Amendments to IFRS 1 and IAS 28 due to Improvements to IFRSs (cycle 2014-2016) resulting from the annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to removing inconsistencies and clarifying wording adopted by the EU on 7 February 2018 (amendments to IFRS 1 and IAS 28 are to be applied for annual periods beginning on or after 1 January 2018). The adoption of the above presented Amendments and new Standards and Interpretations would have no significant impact on the Group s consolidated financial statements in the period of initial application except for IFRS 9 and IFRS 16. Implementation of IFRS 16 The scoping and the assessment of IFRS 16 standard s financial effect has been started. The overwhelming majority of the expected financial effect can be related to the office building and branch office rentals. Based on the preliminary estimations of the financial effect, the Group expects significant change in the Consolidated Financial Position, while the effect in the Consolidated Statement of Profit or Loss is expected to be insignificant. The analysis and estimating quantitative effects are still in progress during the preparation of these Consolidated Financial Statements. 9

NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS [continued] 1.2. Basis of Accounting [continued] 1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not yet effective [continued] Under IFRS 16 a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is treated similarly to other non-financial assets and depreciated accordingly. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate. As with IFRS 16 s predecessor, IAS 17, lessors classify leases as operating or finance in nature. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise a lease is classified as an operating lease. For finance leases a lessor recognises finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the net investment. A lessor recognises operating lease payments as income on a straight-line basis or, if more representative of the pattern in which benefit from use of the underlying asset is diminished, another systematic basis. Implementation of IFRS 9 The Group analysed the estimated impact of the application of IFRS 9 in accordance with IAS 8, paragraph 30-31 and is presented in the Group s consolidated financial statements the following way. IFRS 9 Financial Instruments replaces IAS 39 "Financial Instruments: Recognition and Measurement" for annual reporting periods commencing on or after 1 January 2018. It contains changes to the requirements relating to the recognition and measurement, impairment, derecognition and hedge accounting. The Group started its preparation for IFRS 9 actively in 2016, led by the Bank s Risk Management and Finance Divisions, and during 2017 much of the preparation was finalized centrally. The preparations covered the key challenges that the Bank faces with the new standard. The identification of gaps between its currently developed methodologies and the IFRS 9 requirements in classification and measurement, impairment and hedge accounting was completed in recent months, with various harmonizing processes required in respect of measuring a significant increase in credit risk (SICR). Finalisation of most of these activities is planned for the first half of 2018, although some of them may not be finalised until the end of 2018 for some insignificant portfolios. Classification and measurement IFRS 9 introduces a new approach for the classification of financial assets driven by cash flow characteristics and the business model in which an asset is held. The Bank recognizes the financial liabilities on amortized cost except in those cases when the standard requires otherwise, or according to the fair value option the entity chose to recognize the financial instrument on the fair value through profit or loss. Preliminary analyses of the business models and contractual cash flows on the Group s significant portfolios were performed to determine by product segments those financial instruments that would be measured at amortised cost, at fair value through profit or loss, or at fair value through Other Comprehensive Income. According to the estimation, HUF million 23,173 loans will be measured at fair value as at 1 January 2018 in the consolidated financial statements. Hedge accounting IFRS 9 introduces a substantially revised model for hedge accounting, with enhanced disclosures about risk management activity. The new model aligns accounting treatment with risk management activities, having enabled entities to better reflect these activities in their financial statements. In addition, users of the financial statements are provided with better information about risk management and the effect of hedge accounting on the financial statements. OTP has already started to implement the requirements of IFRS 9 for the hedge accounting. Impairment IFRS 9 introduces an expected-loss impairment model instead of the previously applied incurred loss model that requires a more timely recognition of credit losses. The standard requires entities to account for expected credit losses from the moment when financial instruments are first identified. The use of a new, three stage model was implemented for IFRS 9 purposes. The new impairment methodology is used to classify financial instruments in order to determine whether credit risk has significantly increased since initial recognition and able to identify credit-impaired assets. For instruments with credit-impairment or significant increase of credit risk, lifetime expected losses will be recognized. 10

NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS [continued] 1.2. Basis of Accounting [continued] 1.2.2. New and revised Standards and Interpretations issued by IASB and adopted by the EU but not yet effective [continued] Impairment [continued] The increased credit-impairment is identified by transactions on the basis of predetermined conditions and beyond this the estimation is made on a portfolio level. Assets where no significant increase of credit risk (excluding purchased or originated credit-impaired financial assets) was identified remains to be provisioned based on a 12- month expected loss methodology. For purchased or originated credit-impaired financial assets, the same lifetime expected loss methodology was extended in order to be able to capture the cumulative changes in lifetime expected credit losses since the initial recognition as a credit-impaired instrument. The Group chose the use of the simplified impairment approach for trade receivables and contract assets. The Group started to further improve its risk management definitions, processes and methodological analysis in line with the expectations of IFRS 9. The Bank has started developing the methodology using the behavioural scoring model for the identification of significant increase of credit risk and the calculation of expected credit losses through the use of IFRS 9 compliant risk parameters. Based on the gap analyses and the changes in methodology, the main principles regarding the IT solutions for IFRS 9 implementation were laid down. Preliminary specifications were prepared and IT implementation was completed mostly in 2017, although there are ongoing aspects such as rating/scoring models for significant portfolios, where the developments have not yet been finished. The estimation of quantitative impact of IFRS 9 is based on the best estimation of our management as of the date of the issue of these consolidated financial statements. However the management of the Group consider uncertainties exist in respect of certain aspects of the methodology described above, together with interpretations of the standard, and evolving industry practice, and these uncertainties could result in these initial estimates varying to what is ultimately adjusted as of 1 January 2018, and the amount of the variance could be significant. The IFRS 9 implementation project was driven by the Group headquarters. The unified methodology and the initial parameter estimation was developed and delivered centrally. The rollout of the calculations to the subsidiaries is ongoing and at the time of issue of these consolidated financial statements had not been completed. The preliminary estimate for the impact of implementing the IFRS 9 standards, including the deferred tax effect, on the retained earnings is around HUF 50 billion decrease in the opening consolidated balance sheet as of 1 January 2018. OTP Bank opted to apply transitional rules (phase-in), i.e. in 2018 the expected negative CET1 impact will be around 3 bps. In HUF million (before tax) Opening balance according to IAS 39 as at 1 January 2018 Remeasurement due to reclassification Remeasurement due to impairment Opening balance according to IFRS 9 as at 1 January 2018 Placements with other banks 462,180 - (566) 461,614 Loans 6,987,834 1,425 (46,277) 6,942,982 Securities 3,744,312 - (5,574) 3,738,738 Amounts due to banks (472,068) (1,437) - (473,505) Loan commitments (offbalance sheet items) (16,880) - (6,212) (23,092) Total - (12) (58,629) - 11

NOTE 1: ORGANIZATION AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS [continued] 1.2. Basis of Accounting [continued] 1.2.3. Standards and Interpretations issued by IASB, but not yet adopted by the EU [continued] - IFRS 14 Regulatory Deferral Accounts (effective for annual periods beginning on or after 1 January 2016) - the European Commission has decided not to launch the endorsement process of this interim standard and to wait for the final standard, - IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2021), - Amendments to IFRS 2 Share-based Payment - Classification and Measurement of Share-based Payment Transactions (effective for annual periods beginning on or after 1 January 2018), - Amendments to IFRS 9 Financial Instruments - Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019), - Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and further amendments (effective date was deferred indefinitely until the research project on the equity method has been concluded), - Amendments to IAS 19 Employee Benefits - Plan Amendment, Curtailment or Settlement (effective for annual periods beginning on or after 1 January 2019), - Amendments to IAS 28 Investments in Associates and Joint Ventures - Long-term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019), - Amendments to IAS 40 Investment property Transfers of Investment Property (effective for annual periods beginning on or after 1 January 2018), - Amendments to various standards Improvements to IFRSs (cycle 2015-2017) resulting from the annual improvement project of IFRS (IFRS 3, IFRS 11, IAS 12 and IAS 23) primarily with a view to removing inconsistencies and clarifying wording (effective for annual periods beginning on or after 1 January 2017 and amendments to IFRS 1 and IAS 28 are to be applied for annual periods beginning on or after 1 January 2019), - IFRIC 22 Interpretation Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or after 1 January 2018), - IFRIC 23 Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019). Hedge accounting regarding the portfolio of financial assets and liabilities, whose principle has not been adopted by the EU, is still unregulated. According to the Group s estimates, application of hedge accounting for the portfolio of financial assets or liabilities pursuant to IAS 39: Financial Instruments: Recognition and Measurement, would not significantly impact the financial statements of the Group, if applied as at the balance sheet date. The adoption of the above presented Amendments to the existing Standards, new Standards and Interpretations would have no significant impact on the Consolidated Financial Statements in the period of initial application. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies applied in the preparation of the accompanying Consolidated Financial Statements are summarized below: 2.1. Basis of Presentation These Consolidated Financial Statements have been prepared under the historical cost convention with the exception of certain financial instruments, which are recorded at fair value. Revenues and expenses are recorded in the period in which they are earned or incurred. The presentation of Consolidated Financial Statements in conformity with IFRS as adopted by the EU requires the Management of the Group to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and their reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Future changes in economic conditions, business strategies, regulatory requirements, accounting rules and other factors could result in a change in estimates that could have a material impact on future financial statements. 12

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] 2.2. Foreign currency translation In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currencies are translated into functional currencies at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the exchange rates quoted by the National Bank of Hungary ( NBH ), or if there is no official rate, at exchange rates quoted by OTP as at the date of the Consolidated Financial Statements. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for: - exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; - exchange differences on transactions entered into in order to hedge certain foreign currency risks (see note 2.7. below for hedging accounting policies); and - exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in Other Comprehensive Income and reclassified from equity to profit or loss on repayment of the monetary items. For the purposes of presenting Consolidated Financial Statements, the assets and liabilities of the Group's foreign operations are translated into HUF using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in Other Comprehensive Income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Group are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in Other Comprehensive Income and accumulated in equity. 2.3. Principles of consolidation Included in these Consolidated Financial Statements are the accounts of those subsidiaries in which the Bank exercises control. The list of the major fully consolidated subsidiaries, the percentage of issued capital owned by the Bank and the description of their activities is provided in Note 33. However, certain subsidiaries in which the Bank holds a controlling interest have not been consolidated because the effect of consolidating such companies is not material to the Consolidated Financial Statements as a whole (see Note 2.13.). As the ultimate parent, the Bank is preparing consolidated financial statements of the Group. 13

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] 2.4. Accounting for acquisitions Business combinations are accounted for using acquisition method. Any goodwill arising on acquisition is recognized in the Consolidated Statement of Financial Position and accounted for as indicated below. The acquisition date is the date on which the acquirer effectively obtains control over the acquiree. Before this date, it should be presented as Advance for investments within Other assets. Goodwill, which represents the residual cost of the acquisition after obtaining the control over the acquiree in the fair value of the identifiable assets acquired and liabilities assumed is held as an intangible asset and recorded at cost less any accumulated impairment losses in the Consolidated Financial Statements. If the Group loses control of a subsidiary, derecognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost and recognizes any difference as a gain or loss on the sale attributable to the parent in Statement of Profit or Loss. Goodwill acquired in a business combination is tested for impairment annually or more frequently if events or changes in circumstances indicate. The goodwill is allocated to the cost generating units that are expected to benefit from the synergies of the combinations. The Group calculates the fair value based on discounted cash-flow model. The 5 year period explicit cash-flow model serves as a basis for the impairment test by which the Group defines the impairment need on goodwill based on the strategic factors and financial data of its cash-generating units. The Group, in its strategic plan, has taken into consideration the effects of the present global economic situation, the cautious recovery of economic situation and outlook, the associated risks and their possible effect on the financial sector as well as the current and expected availability of wholesale funding. Negative goodwill (gain from bargain purchase), when the interest of the acquirer in the net fair value of the acquired identifiable net assets exceeds the cost of the business combination, is recognized immediately in the Consolidated Statement of Profit or Loss as other income. 2.5. Securities held-to-maturity Investments in securities, traded in active market (with fixed or determinable cash-flows) are accounted for on a settlement date basis and are initially measured at fair value. At subsequent reporting dates, securities that the Group has the expressed intention and ability to hold to maturity are measured at amortised cost, less any impairment losses recognized to reflect irrecoverable amounts. The amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the investment so that the revenue recognized in each period represents a constant yield on the investment. Such securities comprise mainly securities issued by the Hungarian and foreign Government, discounted Treasury bills and corporate bonds. 2.6. Financial assets at fair value through profit or loss 2.6.1. Securities held for trading Investments in securities are accounted for on a settlement date basis and are initially measured at fair value. Securities held for trading are measured at subsequent reporting dates at fair value. Unrealized gains and losses on held for trading securities are recognized in profit or loss and included in the Consolidated Statement of Profit or Loss for the period. The Group mainly holds these securities to obtain short-term gains consequently realised and unrealised gains and losses are recognized in the net operating income. The Group applies the FIFO 1 inventory valuation method for securities held for trading. Such securities consist of corporate shares, investment bonds, Hungarian and foreign government bonds, discounted and interest bearing treasury bills and other securities. 1 First In First Out 14

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] 2.6. Financial assets at fair value through profit or loss [continued] 2.6.2. Derivative financial instruments In the normal course of business, the Group is a party to contracts for derivative financial instruments, which represent a very low initial investment compared to the notional value of the contract and their value depends on value of underlying asset and are settled in the future. The derivative financial instruments used include interest rate forward or swap agreements and currency forward or swap agreements and options. These financial instruments are used by the Group both for trading purposes and to hedge interest rate risk and currency exposures associated with its transactions in the financial markets. Derivative financial instruments are accounted for on a trade date basis and are initially measured at fair value and at subsequent reporting dates also at fair value. Fair values are obtained from quoted market prices, discounted cashflow models and option pricing models as appropriate. The Group adopts multi curve valuation approach for calculating the net present value of future cash-flows based on different curves used for determining forward rates and used for discounting purposes. It shows the best estimation of such derivative deals that are collateralised as the Group has almost all of its open derivative transactions collateralised. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in profit or loss and are included in the Consolidated Statement of Profit or Loss for the period. Each derivative deal is determined as asset when fair value is positive and as liability when fair value is negative. Certain derivative transactions, while providing effective economic hedges under the risk management policy of the Group, do not qualify for hedge accounting under the specific rules of IAS 39 and are therefore treated as derivatives held for trading with fair value gains and losses charged directly to the Consolidated Statement of Profit or Loss. Foreign currency contracts Foreign currency contracts are agreements to exchange specific amounts of currencies at a specified rate of exchange, at a spot date (settlement occurs two days after the trade date) or at a forward date (settlement occurs more than two days after the trade date). The notional amount of these spot contracts does not represent the actual market or credit risk associated with these contracts. Foreign currency contracts are used by the Group for risk management and trading purposes. The risk management foreign currency contracts of the Group were used to hedge the exchange rate fluctuations of loans and deposits to credit institutions denominated in foreign currency. Foreign exchange swaps and interest rate swaps The Group enters into foreign exchange swap and interest rate swap transactions. The swap transaction is an agreement concerning the swap of certain financial instruments, which usually consists of a prompt and one or more forward contracts. Interest rate swaps oblige two parties to exchange one or more payments calculated with reference to fixed or periodically reset rates of interest applied to a specific notional principal amount (the base of the interest calculation). Notional principal is the amount upon which interest rates are applied to determine the payment streams under interest rate swaps. Such notional principal amounts often are used to express the volume of these transactions but are not actually exchanged between the counterparties. The interest rate swaps are used by the Group for risk management and trading purposes. Cross-currency interest rate swaps The Bank enters into cross-currency interest rate swap (CCIRS) transactions which have special attributes, i.e. the parties exchange the notional amount at the beginning and also at the maturity of the transaction. A special type of these deals is the mark-to-market CCIRS agreements. At this kind of deals the parties in accordance with the foreign exchange prices revalue the notional amount during lifetime of the transaction. 15

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] 2.6. Financial assets at fair value through profit or loss [continued] 2.6.2. Derivative financial instruments [continued] Equity and commodity swaps Equity swaps obligate two parties to exchange more payments calculated with reference periodically reset rates of interest and performance of indexes. A specific notional principal amount is the base of the interest calculation. The payment of index return is calculated on the basis of current market price compared to the previous market price. In case of commodity swaps payments are calculated on the basis of the strike price of a predefined commodity compared to its average market price in a period. Forward rate agreements (FRA) A forward rate agreement is an agreement to settle amounts at a specified future date based on the difference between an interest rate index and an agreed upon fixed rate. Market risk arises from changes in the market value of contractual positions caused by movements in interest rates. The Group limits its exposure to market risk by entering into generally matching or offsetting positions and by establishing and monitoring limits on unmatched positions. Credit risk is managed through approval procedures that establish specific limits for individual counterparties. The Group s forward rate agreements were transacted for management of interest rate exposures and have been accounted for at mark-to-market fair value. Foreign exchange options A foreign exchange option is a derivative financial instrument that gives the owner the right to exchange money denominated in one currency into another currency at a pre-agreed exchange rate at a specified future date. The transaction, for a fee, guarantees a worst-case exchange rate for the futures purchase of one currency for another. These options protect against unfavourable currency movements while preserving the ability to participate in favourable movements. 2.7. Derivative financial instruments designated as a fair-value or cash-flow hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that prove to be highly effective in relation to the hedged risk, are recorded in the Consolidated Statement of Profit or Loss along with the corresponding change in fair value of the hedged asset or liability that is attributable to the specific hedged risk. The ineffective element of the hedge is charged directly to the Consolidated Statement of Profit or Loss. The conditions of hedge accounting applied by the Bank are the following: formally designed as hedge, proper hedge documentation is prepared, effectiveness test is performed and based on it the hedge is qualified as effective. Changes in fair value of derivatives that are designated and qualify as cash-flow hedges and that prove to be highly effective in relation to the hedged risk are recognized in their effective portion as reserve in Comprehensive Income. Amounts deferred in Comprehensive Income are transferred to the Consolidated Statement of Profit or Loss and classified as revenue or expense in the periods during which the hedged assets and liabilities effect the Consolidated Statement of Profit or Loss for the period. The ineffective element of the hedge is charged directly to the Consolidated Statement of Profit or Loss. The Group terminates the hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. 2.8. Offsetting Financial assets and liabilities may be offset and the net amount is reported in the Consolidated Statement of Financial Position when the Group has a legally enforceable right to set off the recognized amounts and the transactions are intended to be reported in the Consolidated Statement of Financial Position on a net basis. The Group does not offset any financial assets and financial liabilities. 16

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [continued] 2.9. Embedded derivatives Sometimes, a derivative may be a component of a combined financial instrument that includes a host contract and a derivative (the embedded derivative) effecting cash-flows or otherwise modifying the characteristics of the host instrument. An embedded derivative must be separated from the host instrument and accounted for as a separate derivative if, and only if: The economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; A separate financial instrument with the same terms as the embedded derivative would meet the definition of a derivative as a stand-alone instrument; and The host instrument is not measured at fair or is measured at fair value but changes in fair value are recognized in Other Comprehensive Income. 2.10. Securities available-for-sale Investments in securities are accounted for on a settlement date basis and are initially measured at fair value. Securities available-for-sale are measured at subsequent reporting dates at fair value. Unrealized gains and losses on available-for-sale financial instruments are recognized directly in Other Comprehensive Income, except for interest and foreign exchange gains/losses on monetary items, unless such available-for-sale security is part of an effective hedge. Such gains and losses will be reported when realized in Consolidated Statement of Profit or Loss for the applicable period. The Group applies the FIFO 1 inventory valuation method for securities held for trading. Such securities consist of Hungarian and foreign government bonds, corporate bonds, discounted Treasury bills and other securities. Other securities include shares in investment funds, shares in non-financing companies and venture capital fund bonds. The provision for impairment is calculated based on discounted cash-flow methodology for debt instruments and calculated based on fair valuation on equity instruments, using the expected future cash-flow and original effective interest rate if there is objective evidence of impairment based on significant or prolonged decrease in fair value. Securities available-for-sale are remeasured at fair value based on quoted prices or amounts derived from cash-flow models. In circumstances where the quoted market prices are not readily available, the fair value of debt securities is estimated using the present value of future cash-flows and the fair value of any unquoted equity instruments are calculated using the EPS ratio. Those available-for-sale financial assets that do not have a quoted market price and whose fair value cannot be reliably measured by other models mentioned above, are measured at cost, less provision for impairment, when appropriate. This exception is related only to equity instruments. Impairment on equity available-for-sale securities is accounted only if there is a significant or prolonged decrease in the market value. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale securities is not reversed through profit or loss. 2.11. Loans, placements with other banks and allowance for loan and placement losses Loans and placements with other banks are accounted at amortized cost, stated at the principal amounts outstanding (including accrued interest), net of allowance for loan or placement losses, respectively. Transaction fees and charges should adjust the carrying amount at initial recognition and be included in effective interest calculation. Loans and placements with other banks are derecognised when the contractual rights to the cash-flows expire or they are transferred. Interest and amortised cost are accounted using effective interest rate method. When a borrower is unable to meet payments as they fall due or, in the opinion of the Management, there is an indication that a borrower may be unable to meet payments as they fall due, all unpaid interest is impaired. According to IAS 39, initially financial asset shall be recognized at fair value which is usually equal to transaction value of loans and receivables. Initial fair value of loans and receivables lent at interest below market conditions is lower than their transaction price. As a consequence the Bank is deferring the difference between the fair value at initial recognition and the transaction price relating to loans and receivables because input data for measuring the fair values are not available on observable markets. 1 First In First Out 17